Friday's decline reversed the short-term uptrend, but the medium-term trend remains up. On the daily chart, SPY has been zigzagging higher the last 3-4 months. After moving above its October high in mid November, SPY stalled around 110 with choppy trading for two weeks. Friday's gap and sharp decline pushed SPY below last week's low to start a short-term downtrend. The August trendline is the most obvious target around 105-106. The bottom indicator window shows MACD(5,35,5) moving back below its signal line for another bearish signal. This is the second bearish crossover in five trading days. These bearish crossovers were interrupted with a one-day bullish crossover on Wednesday. For MACD(5,35,5), it is 2-1 in favor of the bears right now.
On the 30-minute chart, SPY gapped down and broke short-term support in early trading. Despite an oversold bounce back towards 110, broken support turned into resistance and ultimately held. Also notice that CCI plunged below -100 to confirm the support break. This is the first combination support break and CCI plunge since the uptrend began on November 4th. It is also worth pointing out that SPY twice to hold big gaps on November 16th and 23rd, both Mondays. Over the last two weeks, SPY gapped up to start the week and gapped down to finish the week. This is some seriously erratic trading, but the down gaps as the end of the week favor the bears.
The 10-minute chart expands on broken support around 110 turning into resistance. Also notice that the bounce to 100.25 retraced around 62% of the decline (111.5 to 108.25). After rebounding to the 110 area in the morning, selling pressure appeared in the afternoon and SPY established resistance around 110.25-110.40. Short-term, a move above 110.50 would call for a re-evaluation of this downtrend.
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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